WASHINGTON, Oct. 16, 2013 – Dairy Farmers of America, the nation’s largest dairy cooperative in terms of farm members, and Dairylea Cooperative of Syracuse, N.Y., which represents about 2,000 farmers in New England, New York, Pennsylvania, Maryland and Ohio, said Tuesday they would merge next year pending approval of Dairylea members.

The DFA Board has approved the merger and the Dairylea board presented it endorsement of the merger to the co-op’s annual meeting Tuesday. The member vote is scheduled for February.

The Dairylea board “spent a lot of time over last two or two and a half years looking at how to position ourselves to bring most value to members” in a dairy business that depends increasingly on the export market, said CEO Greg Wickham. (Exports are expected to account for more than 15 percent of U.S. farm milk production this year, according to the U.S. Dairy Export Council.)

The cooperative looked at making investments in plants and businesses, “looked at doing it ourselves or with others and decided to seek a partner,” Wickham said. “It was an easy decision that a merger with DFA was the best option. We are very comfortable. We know the folks at DFA.” The two cooperatives have been part of a joint venture, Dairy Marketing Services, which markets a significant share of milk in New England. “It was natural to take the next evolution.”

DFA CEO Rick Smith, in a telephone conference call with reporters, called the merger “a natural progression of the partnership we have had with Dairylea for 13 or 14 years. Dairylea members will get the benefits and value that’s been built up of Dairylea over the years and benefit from DFA’s global presence and activities,” he said.

Although he saw “some streamlining that can occur over the next few years” and some benefits to DFA’s balance sheet, the purpose of the merger was not primarily financial, Smith said. The cooperatives did not disclose monetary arrangements. “This is a proposition that more focuses on expanding the benefits rather than the savings,” Smith said.

Dairylea, DFA and their DMS venture are defendants in a lawsuit filed in 2009 against them and Dean Foods by dissident farmers in New England who claim that the cooperatives and Dean fixed prices to the detriment of independent farmers. Dean settled the suit but the cooperatives have continued to protest the charges and have prepared to go to trial next year.

“The lawsuit had no relevance or impact on any of this,” Smith said. “The lawyers would say to us that we probably do not have to file” a notice with the Department of Justice under the Hart-Scott-Rodino antitrust law, he added, “but for last number of years we have worked very hard” to be transparent and work with the DOJ Antitrust Division. “We had planned to give them a heads up but the government shutdown got in the way.” He said DOJ will be informed of the deal.

In a written statement, Dairylea and DFA said they have had a working relationship since DFA’s founding in 1998, and Dairylea has been a non-patronage member cooperative of DFA since 2002. On an annual basis, Dairylea markets 6.5 billion pounds of raw milk valued at $1.7 billion for its 1,250 member farms, as well as 800 member cooperative farms. DFA’s web site says it has 9,572 farm members and sells 83 billion pounds of milk worth more than $8 billion.



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